The latest development in retailing is called omni-channel, and it's going to remake the ad agency.
Many people still dismiss the concept as a buzzword. But within two to three years, this form of retailing, which lets consumers move seamlessly among all retail environments -- real and virtual -- as if they were one, will be the norm. Agencies will have to get into the operations-consulting game to keep up with it.
Here's how omni-channel is already working. H.H. Gregg and Jo-Ann Fabric and Craft Stores, to take two examples, let their consumers check inventory by store, buy online and pick up the product at their chosen location. Restoration Hardware makes its stores into brand showrooms, where consumers can handle and test products while shopping the chain's vast online catalogs and website. WalmartLabs is mining SoMoLo (social, mobile, local) data to predict shoppers' next purchases and stock Walmart.com based on social-media activity.
It may seem like a simple task, but unifying the focus of a Fortune 500 retailer or manufacturer along these lines is a complex undertaking. First, you have to prioritize among hundreds of possible initiatives. Then you have to rethink the customer experience across channels and devices, and build the communications web to bring it together, from conference room to showroom. Within the organization, you need to break down functional silos and create incentives for different departments to share data and sell products from every channel.
Most retailers may have begun to adjust, with improved customer-service policies, new mobile features or updated product-delivery options, but they are still largely missing the mark. Still, several of the world's most innovative chains are closing in on the ideal. Nordstrom's, Best Buy, Macy's, Urban Outfitter, Staples and Restoration Hardware are beginning to make the organizational transitions needed to develop a consistent experience for myriad types of shoppers.
Led by the belief that this is the future of retailing, these chains are uniting retail and e-commerce teams with one leader, integrating technology systems to act as one, seeking a unifying goal for the business (not the channel). Instead of year-over-year store comps, they're measuring the combined impact of communications and sales across all channels. In stores, they're adding quick pickup counters for online purchasers, training staff to handle instant checkout via smartphone and tablet and gathering data to personalize the shopping experience.
What does this mean for agencies? Just as consumers can't be bothered with disconnected retail channels, retailers don't want to juggle a dozen consultancies to accomplish something they're too tied up to do in-house. They need partners capable of going from roadmap to results in a matter of months. So they're starting to ask agencies to do things that Don Draper never imagined would be part of the scope of work.
For starters, we have to help clients think through business policies, aspects of store layout and customer service. It doesn't serve the business to cruise consumers through an elegant online experience -- picking out the products, finding the stores, checking inventory and making the purchase -- only to stick them at the back of a customer-service line when they enter the store for pickup. The hassle is amplified by the angst of people waiting to return faulty items.
So we need to help wrangle with questions likes these: Do we have designated spaces in the parking lot for people who bought online to pick up in-store? Do we have a dedicated pickup counter? Are we engineered to make ordered items available for pickup in less than 20 minutes? Do we have cabinet space for all the products that are awaiting pickup? Do we allow customers to return endless aisle products to a store location, even though they were purchased online? If so, how is that product returned to inventory?
We also need to help clients redraw distribution strategies. It used to be acceptable to maintain separate inventories and distribution centers for retail and e-commerce/catalog. In an omni-channel world, retailers have to merge them, so consumers can see and order from all that's available anywhere in the retail ecosystem. Retailers need to consider using stores, which are usually closer to consumers than distribution centers, to provide backup inventory for online sales.
Inside agencies, all of this means new structure, new people and new compensation models. Agencies traditionally are organized by competencies and channels. Consumer insights and strategy are separated from the mobile team, which is separate from the technology team, while areas like digital marketing and analytics are limited to the online channel. But omni-channel demands a cross-functional team structure. We need to hire people who've worked on the client side and people with specialized experience in store design, merchandising and distribution. We need to put them side by side with project managers, media, tech and creative pros.
Time is running out for doing things as we have in the past. Consumers will soon stop engaging with retailers that don't meet them where they are. Retailers and manufacturers will do the same with agencies.